The recent theft of credit card information from tens of millions of customers at Target is the main reason every credit card in the United States will have a smart chip. While the rest of the world adopted smart chips years ago, the U.S. has fallen drastically behind with implementing these measures, and at the cost of millions of fraudulent dollars being spent on credit cards.
The Evolution of Credit Card Magnetic Stripe and Smart Chip Technologies
The magnetic stripe technology used by credit card issuers for credit card processing in the United States has been around since the 1960’s. An engineer at IBM invented the technology to store basic information about an individual for security entrance purposes. The technology was then adopted for use in driver’s licenses and credit cards. While this is an inexpensive and convenient solution for credit card issuers, the advancements made in hacking have proved that swipe technology is outdated.
Smart chips were first introduced by Visa and MasterCard for credit card processing in France in 1992. Since that time, every European country has adopted the technology, along with the majority of developed countries around the world. The simple fact that the U.S. has not implemented this type of technology has opened up Americans to a variety of identity theft and fraud risks that is unmatched anywhere outside our borders.
How Smart Chips Increase Security Protection for Consumers
Credit card cloning is a popular way for hackers to steal credit card information and duplicate fake credit cards in their name.
Smart chips help prevent this type of theft because one a credit card with a smart chip is cloned by stealing information from a single transaction, the fake credit card will not work when someone attempts to make a purchase. The data on the fake credit card will be identified as have been used in a previous transaction and therefore no longer valid. The card will be declined by the system and the thief will be caught in the act.
How The Implementation of Smart Chips Will Affect Merchant Accounts and Small Businesses
Any type and size of business will immediately benefit from smart chip implementation.
An increase in credit card fraud in the United States is the main reason for smart chip implementation. When credit card fraud occurs, all parties involved are losers. The consumer’s information was stolen, the business will likely have to deal with a charge back and the credit card company will have to pay the claim.
Because smart chips will help stop potential credit card thieves by declining fraudulent transactions, businesses will deal with less charge backs to their merchant accounts. Small business owners will also deal with fewer disputes from consumers and credit card companies, and won’t lose money in paybacks to financial institutions.